For Toyota, Too Little, Too Late?

Jason Chan — Thu, 25 Feb 2010 04:54:30 +0000

After decades of hard work setting the bar for the industry for quality and reliability, Toyota’s recent recall woes with a number of its models have left its revered reputation in tatters. Managing 10 million recalled cars is a costly issue no doubt, and for some corporate cultures, one of the last things you’d ever want to do. But consider what was at stake: sudden acceleration that can cause life-threatening accidents. Executives could have acted decisively and done the right thing by pre-emptively recalling vehicles, but only did so after weeks of public and government outcry. Sales are most definitely taking a hit, and export figures are being revised downward. In the first couple of weeks, Toyota’s market capitalization dropped over 20% or $35 billion.

Recalls are nothing new and it’s all about restoring confidence. The 1982 Tylenol recall case continues to be the gold standard, when Johnson & Johnson immediately pulled every single bottle of Tylenol off the shelves across the country. And it wasn’t even their fault — someone had tampered with a few bottles and laced the pills with deadly cyanide. They did it quickly and offered replacement pills for free. At the time, Tylenol accounted for 17% of JnJ’s net income and 37% of the analgesic market. Market share plummeted to 7% immediately after, but by putting their customers first, that number jumped back up to 30% shortly thereafter. The long-term benefit of having a brand you can trust is priceless — in pharma, trust is the only thing that matters.

In this day and age, where the social space can magnify the perceived severity of a problem, it really pays to act quickly and I would argue, go far beyond what is required. Now that the cat is out of the bag, here’s what Toyota should consider doing to help restore the public’s confidence:

Make yourself available. Establish a direct phone, email, Twitter, Facebook, you name it venue for anyone who has questions.
Respond with action. Staff it with people who are empowered to take action and make decisions quickly. When it comes to safety, no one wants the run-around.
Listen and listen carefully. Customers have all kinds of ideas on how they want the problem solved and how they want to be treated. Quantify and qualify sentiment and act appropriately.
Go the extra mile. Toyota executives have refused to go the full-extent and their solution admittedly, doesn’t necessarily solve all of the problems. In this case, it would probably mean replacing cars outright — a very costly but potentially overwhelmingly effective. maneuver.
Keep in touch over the long run. This isn’t a “one and done” effort. Automobiles are significant purchases, so be sure to reach out to affected customers 2 months, 6 months, 1 year, 2 years, 5 years from now. You get the picture.

Toyota is at a critical junction right now. In some ways they’re already behind the curve, so they should really shift into high gear and get going. Customers on the fence need to see action.

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For Toyota, Too Little, Too Late?